Benefits of Diversifying your Supply Chain Strategy
A supply chain is driven by an on-demand-driven formula; the consumer dictates when and how they purchase a good(s).
Imagine what would happen if suddenly everybody changed 50% of their habits and/or consumption patterns!
You can stop imagining; this is what happened during the pandemic. Companies had to shut down operations, and people stayed home or worked from home, relying on e-commerce platforms to supply their favorite goods.
Predictive consumption patterns were thrown off the rails as our consumption patterns changed quickly; downstream suppliers either shut down or did not anticipate the exponential increase in orders. Additionally, the logistics to move the goods to your doorstep was the second in line when goods were finally ready to ship. Vessels that were scheduled to move from point A suddenly had to be at point F. Although logistics companies do an outstanding job and are well-oiled machines, flexibility is not their forte if it comes down to moving empty vessels from A to F.
Add some additional ingredients and Houla! We have the Perfect Storm!
Many companies started to look at diversifying their supply chains by either reviewing their manufacturing footprint or de-risking their supply chain & nearshoring their procurement strategy.
Mexico has been the obvious choice for de-risking the supply chain for many companies. Although certain commodities can t be found, Mexico has developed a strong supply base over the past decades. In general, we see 90% of the key commodities supplied to the manufacturing industry can be found.
Finding the right supplier/partner is key. Every company has a different strategy and/or requirements, such as HVLM (High Volume Low Mix) or LVHM (Low Volume High Mix) factors that we often see buyers being turned away as the strategy doesn’t align with the seller’s roadmap.
Materials are a large portion of the total COGS (Cost of Goods Sold) and the cost to reduce the TCO (Total Cost of Ownership) to organizations.
Some benefits of considering nearshoring your supply chain.
1. De-risking the supply strategy by having multiple suppliers in different regions.
2. Supply base in the same timezone
3. Reduced Leadtimes
4. Reduced Order Liability
5. Increasing supply flexibility
The procurement side of things is a portion of each company’s S&OP (Sales & Operations Planning); a good rule of thumb is to review your plan and re-align towards the new normal.
Contact us for detailed information on our consulting services, and support you in diversifying your supply chain strategy.
About the author
Kurt Schmidt, Consulting Director
Kurt is an operational turnaround and crisis management expert and Consulting Director for Prodensa. Originally from Holland, Kurt has more than 20 years of experience working in the North American manufacturing industry, honing expertise in global supply chain, logistics, and operational excellence. Deriving from 20 years of manufacturing leadership, Kurt develops forward-thinking solutions for Prodensa clients by capitalizing on opportunities detected in import/export markets; through principles of Lean Manufacturing; assessing opportunities for automation and digitalization; analyzing global supplier networks; diversification of product portfolios; due diligence for M&As and operations expansions.